Most of us don't put nearly as much though as we should into planning how our estates will be distributed, and the estimates are that nearly two-thirds of Americans die intestate, without having prepared a will. While their estates will eventually be distributed according the inheritance laws in their states, those laws may not reflect at all how they would have chosen to pass on their assets. If you want to avoid that situation, finding a firm of experienced estate planning attorneys is your best answer.
Some who would never consider fixing a garage door or stuccoing a wall would unthinkingly prepare a will or trust using many materials found in bookstores. Bookstores abound with quick-fix be-your-own-lawyer books and CDs, featuring forms and fill-the-blank forms and programs for wills, trusts, and powers of attorney for healthcare decisions. Some of these materials are even state specific, offering different provisions for residents of different states. Some of these do-it-yourself materials are fine, and may even be useful. If correctly used, many of these forms might work for a do-it-yourselfer. But suppose your case is different? Suppose you fail to properly use the form?
The irrevocable life insurance trust (ILIT) is probably the most significant insurance related estate planning tool available to you. The irrevocable nature of the trust can provide estate tax savings while the insurance provides a cost effective way to pay estate taxes (depending on age and health). The appeal of an irrevocable life insurance trust is that the death proceeds of the policy are not included in the insured's estate. If kept out of the decedent's estate, the death proceeds will not increase the estate tax burden. The irrevocable life insurance trust is a double winner because, not only are the death proceeds outside the insured's estate, but the proceeds can be available to meet estate liquidity needs.
To insure that the life insurance proceeds will be excluded from the insured's estate, two of the primary requirements that must be met are that the insured must not have any incidents of ownership in the policy and the trust must be irrevocable. Some people believe that, in the face of tax law uncertainty, clients should avoid using ILITs. These same people fear that once a policy is placed in an ILIT, the policy is locked in the trust forever, even in the unlikely event that the estate tax is repealed. Nothing could be further from the truth. In reality, ILITs can be drafted with flexibility. Some ILITs today are being drafted to give the trustee the discretion to distribute the cash surrender value of the insurance policy to trust beneficiaries during the trust creator's lifetime. This "escape" language builds flexibility into ILITs.
One myth many have is that a person's assets will always go "to the state" if he or she dies without a will. This is false. The "intestacy" statutes provide for specific property dispositions in the absence of a will -- however, these dispositions may not reach the desired result. For instance, in California should a wife with two adult children by her husband die, the husband would by definition already own one half (1/2) of the community interest of the entire estate. Under the intestacy statutes, the husband would also receive one half (1/2) of the wife's community share [California Probate Code 6401(a)] (now, giving him a grand total three fourths' (3/4ths) share of the total estate of both) and the two adult children would split the remaining one half (1/2) of their mother's assets. [California Probate Code 6402(a)]. However, this may not be the best: If the children are stingy and well-off adults, the wife might have wanted her entire estate to go to her surviving husband. Another myth is that probate estates always go on endlessly, and are always horrendously expensive. While estates can be time consuming and expensive, most can be handled in months, depending upon the complexity of the estate, the number of creditors, and other factors such as the tranquility of family relationships. On the other hand, there is certainly truth to the criticism that probate estates can be lengthy affairs: Personally, I am familiar with a probate estate which has been pending since 1991 -- about 16 years. Also, probate estates can take additional time if there are complicating circumstances like (for example) the heirs are difficult to locate or if there are disputes among family members.
Estate planning attorneys can also advise you as to whether or not any personal changes in you life will require a change in your estate plan. If, for instance, you are widowed or divorced, in you later years, and considering remarriage, you should be aware that there may be consequences for your estate.
Some who would never consider fixing a garage door or stuccoing a wall would unthinkingly prepare a will or trust using many materials found in bookstores. Bookstores abound with quick-fix be-your-own-lawyer books and CDs, featuring forms and fill-the-blank forms and programs for wills, trusts, and powers of attorney for healthcare decisions. Some of these materials are even state specific, offering different provisions for residents of different states. Some of these do-it-yourself materials are fine, and may even be useful. If correctly used, many of these forms might work for a do-it-yourselfer. But suppose your case is different? Suppose you fail to properly use the form?
The irrevocable life insurance trust (ILIT) is probably the most significant insurance related estate planning tool available to you. The irrevocable nature of the trust can provide estate tax savings while the insurance provides a cost effective way to pay estate taxes (depending on age and health). The appeal of an irrevocable life insurance trust is that the death proceeds of the policy are not included in the insured's estate. If kept out of the decedent's estate, the death proceeds will not increase the estate tax burden. The irrevocable life insurance trust is a double winner because, not only are the death proceeds outside the insured's estate, but the proceeds can be available to meet estate liquidity needs.
To insure that the life insurance proceeds will be excluded from the insured's estate, two of the primary requirements that must be met are that the insured must not have any incidents of ownership in the policy and the trust must be irrevocable. Some people believe that, in the face of tax law uncertainty, clients should avoid using ILITs. These same people fear that once a policy is placed in an ILIT, the policy is locked in the trust forever, even in the unlikely event that the estate tax is repealed. Nothing could be further from the truth. In reality, ILITs can be drafted with flexibility. Some ILITs today are being drafted to give the trustee the discretion to distribute the cash surrender value of the insurance policy to trust beneficiaries during the trust creator's lifetime. This "escape" language builds flexibility into ILITs.
One myth many have is that a person's assets will always go "to the state" if he or she dies without a will. This is false. The "intestacy" statutes provide for specific property dispositions in the absence of a will -- however, these dispositions may not reach the desired result. For instance, in California should a wife with two adult children by her husband die, the husband would by definition already own one half (1/2) of the community interest of the entire estate. Under the intestacy statutes, the husband would also receive one half (1/2) of the wife's community share [California Probate Code 6401(a)] (now, giving him a grand total three fourths' (3/4ths) share of the total estate of both) and the two adult children would split the remaining one half (1/2) of their mother's assets. [California Probate Code 6402(a)]. However, this may not be the best: If the children are stingy and well-off adults, the wife might have wanted her entire estate to go to her surviving husband. Another myth is that probate estates always go on endlessly, and are always horrendously expensive. While estates can be time consuming and expensive, most can be handled in months, depending upon the complexity of the estate, the number of creditors, and other factors such as the tranquility of family relationships. On the other hand, there is certainly truth to the criticism that probate estates can be lengthy affairs: Personally, I am familiar with a probate estate which has been pending since 1991 -- about 16 years. Also, probate estates can take additional time if there are complicating circumstances like (for example) the heirs are difficult to locate or if there are disputes among family members.
Estate planning attorneys can also advise you as to whether or not any personal changes in you life will require a change in your estate plan. If, for instance, you are widowed or divorced, in you later years, and considering remarriage, you should be aware that there may be consequences for your estate.
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